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Riding The Stock Waves: Technical Update On JPMorgan

Apr. 08, 2021 8:00 AM ETJPM1 Comment


  • JPM has strongly outpaced the advance in the S&P 500 in 2021.
  • Banks have benefitted from two rounds of massive stimulus.
  • The temporary ease on Supplementary Leverage Ratio is set to expire, creating potential near-term uncertainty.
  • Looking for more investing ideas like this one? Get them exclusively at Stock Waves. Learn More »

Written by Jason Appel

U.S. bank stocks are off to a roaring 2021, and JPMorgan Chase (JPM), to which this article’s analysis pertains, is no exception. As of the market close, Tuesday, April 6, shares in JPM are up 20.04% year-to-date, strongly outperforming both the XLF (of which JPM comprises 11.98%) and S&P 500, which are up year-to-date: 17.61% and 8.46%, respectively.

JPM, like other financial sectors - and in particular, bank stocks - has reaped the benefits of two rounds of massive fiscal stimulus. The most recent earnings release from January states that, in the fourth quarter of 2020, JPM reported a 35% firm-wide increase in average deposits. Also, from the same release, Q4 earnings were $12.1 billion, up 42% from Q4 2019. Certainly, the bank was not impervious to economic impacts attributable to COVID-19, which has created a large expectation of decrease in loan performance, but as Lyn Alden Schwartzer has commented: ”Unlike 2008, the US banking system was well capitalized going into this recession, with a high allocation to cash and Treasuries.”

However, the Fed has announced that as of March 31, 2021, the temporary exclusion of treasuries from the supplementary leverage ratio - SLR - will expire. In 2020, banks were allowed to exclude treasuries from their SLR with hopes this would help stabilize the treasury market by eliminating the incentive for banks to dump their treasury holdings for cash in order to preserve a higher ratio of Tier 1 Capital. This restoration of pre-COVID capital requirements creates some shorter-term uncertainty as to how banks may respond to this apparently unwelcome development.

For very large banks, such as JPM, the SLR requirement is 5% and, as of the most recent earnings release, JPM reported a 6.9% SLR. Keep in mind the 6.9% that is quoted is based on the “eased” calculation which is set to expire

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Stock Waves highlights the highest-probability investment opportunities where technicals and fundamentals align.

Over the years, as a service at ElliottWaveTrader.net, Stock Waves has been guiding members with analysis of individual stocks with the expertise of three industry-leading technical analysts.

In January 2020, Stock Waves rolled out a service within Seeking Alpha’s Marketplace. In addition to our team of Zac Mannes, Garrett Patten, and Harry Dunn, we added Lyn Alden Schwartzer as a Stock Waves analyst to provide her fundamental analysis on individual stock opportunities we see in the coming years.

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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